TEHRAN (Press Shia) – The US administration is cutting more than half of its planned funding to the United Nations agency for Palestinian refugees, a move that could prove catastrophic for millions of people in need.

The State Department announced on Tuesday it was withholding $65mln out of a $125mln aid package earmarked for the United Nations Relief and Works Agency for Palestinian Refugees (UNRWA).

In a letter, the department said that additional US donations will be contingent on major changes by UNRWA.

Those funds are "frozen for future consideration", Heather Nauert, State Department spokeswoman, told reporters.

For nearly 70 years, UNRWA has been the lifeline to the more than five million registered Palestinian refugees in the occupied territories and in Lebanon, Jordan and Syria, Al Jazeera reported.

It offers support in food supply, access to education, healthcare, social services and employment.

This is going to be a big blow because the US is UNRWA's largest donor supplying almost 30 percent of its budget.

The announcement came after US President Donald Trump had threatened on January 3 to cut aid to Palestinians.

In a series of tweets, Trump had said: "… We pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect.

"… With the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"

The move follows Trump’s controversial decision to recognize Jerusalem as Israel's capital, a move that prompted widespread international condemnation and led Palestinian leaders to say that they would "no longer" accept any peace plan put forward by the US.